Coinbase recently introduced cbBTC, a wrapped version of Bitcoin designed to integrate with decentralized finance (DeFi) applications on Ethereum and Base networks. This new product aims to expand Bitcoin’s utility beyond simple holding or trading, allowing users to participate in various DeFi activities without converting their Bitcoin to other cryptocurrencies.
cbBTC is backed 1:1 by Bitcoin held in Coinbase’s custody, enabling seamless transfers between Bitcoin and Ethereum or Base networks. Users can now engage with popular DeFi platforms like Uniswap, Aave, Compound, and Curve using their Bitcoin holdings. The launch of cbBTC marks a significant step towards creating a more interconnected financial ecosystem and potentially accelerating Bitcoin adoption across DeFi platforms.
However, the introduction of cbBTC has not been without controversy. TRON founder Justin Sun voiced concerns about the product on social media platform X. Sun criticized cbBTC for lacking proof of reserve and audits, suggesting that Coinbase could freeze and blacklist addresses transacting with cbBTC. He argued that this level of control contradicts the decentralized nature of Bitcoin and poses security risks to DeFi protocols.
Sun’s comments sparked a debate about the role of centralized entities in the cryptocurrency ecosystem. He referred to cbBTC as “central bank btc,” implying that it goes against the original vision of Bitcoin’s creator, Satoshi Nakamoto.
In response to these criticisms and others about the US-listed spot Bitcoin ETF products, Coinbase CEO Brian Armstrong went on X yesterday to respond. Armstrong clarified that all ETF-related transactions are ultimately settled on-chain, typically within one business day. He emphasized that Coinbase undergoes annual audits by Deloitte and, as a public company, maintains high standards of transparency.
Regarding cbBTC specifically, Armstrong acknowledged that users are indeed trusting a centralized custodian to store the underlying Bitcoin. He stated that Coinbase has never claimed otherwise, suggesting that this model is necessary to facilitate institutional investment in Bitcoin.
Bloomberg Senior ETF Analyst Eric Balchunas had this to say about the rumors about Coinbase and BlackRock:
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